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Indian Auto Components Industry Analysis

June, 2019

The auto-components industry accounted for 2.3 per cent of India’s Gross Domestic Product (GDP) in 2017-18. During the same period, 1.5 million people directly and 1.5 million people indirectly were employed in the auto-components industry.  The auto components sector has been observing robust growth with a turnover of US$ 51.2 billion in FY18 and turnover is anticipated to reach US$ 200 billion by FY26. India's exports of auto components could account for as much as 26 per cent of the market by 2021. Auto-component production in 2018-19 is expected to increase 12-14 per cent in FY19, on the back of robust growth in domestic and export markets. Production of Two Wheelers, Passenger Vehicles, Commercial Vehicles and Three Wheelers reached 24.50 million, 4.03 million, 1.11 million, and 1.27 million in 2018-19. According to Department for Promotion of Industry and Internal Trade, FDI inflow in automotive* sector from April 2000 to December 2019 stood at US$ 21.38 billion.

Favourable government policies such as Auto Policy 2002, Automotive Mission Plan 2016-2026, National Automotive Testing and R&D Infrastructure Projects (NATRiPs), have helped the Indian auto components industry achieve considerable growth. The government has also extended the FAME Scheme from September 2018 to March 2019.

India is emerging as global hub for auto component sourcing. A cost-effective manufacturing base keeps costs lower by 10-25 per cent relative to operations in Europe and Latin America. Relative to competitors, India is geographically closer to key automotive markets like the Middle East and Europe.

Investments and expansions in the Indian Auto component sector-

  • In April 2019, Durr, a German automotive painting and sealing company, entered into a partnership with Patvin to provide automated painting solutions for two or three-wheelers and agricultural machinery for the Indian markets
  • The capital expenditure by the domestic automotive component manufactures is expected at around Rs 24,000 crore (US$ 33.26 billion) over the FY19 and FY20
  • As of December 2018, Kesoram Industries has decided to demerge its tyre business to unlock value and raise capital for expansion. The restructuring will help the company to enter the high margin automotive radial tyre business. The company expects that the demerger of the business may be completed by July 2019.
  • As of December 2018, German automotive major Continental has planned investments of Rs 180 crore (US$ 25.65 million) for setting up a premium surface materials facility in Pune. The facility will have an initial capacity of five million square metres and is expected to start production in 2020.
  • In October 2018, the company inaugurated its second largest manufacturing facility in the Asia Pacific region. The company is planning to expand its product and technical offering over the course of the next few years.
  • As of September 2018, air-compressor manufacturer Elgi Equipments is going to invest Rs 18 crore (US$ 2.56 million) for setting up of a motor production facility in India. The facility is expected to be commissioned in Q1 FY20.
  • As of January,2019 Lite Auto Components Pvt Ltd, a part of Hindustan Magnesium Products Pvt Ltd plans to invest Rs 500 crore (US$ 69.30 million) to set up Magnesium-based manufacturing plant in Andhra Pradesh.
  • In August 2018, the Board of Directors of Amara Raja Batteries approved setting up of a Rs 700 crore (US$ 99.74 million) greenfield automotive battery plant with a production capacity of 6.5 million units per annum. As of October 2018, the company decided to further enhance the capacity of the plant to 10.8 million units in phases.
  • In August 2018, JK Tyre and Industries Ltd inaugurated its state-of-the art global technology centre in Mysore. Research at the centre will focus on various aspects of tyre technology including coming up with advanced laboratory predictors for tyre performance and recognising key inputs for life prediction of rubber products.
  • As of August 2018, Rico Auto Industries is soon going to sign a Joint Venture (JV) deal with HZ Manufacturing to produce automatic transmission for scooters.
  • Bharat Forge entered in an JV with a German co. for developing electrical vehicles by investing Rs 89 crores and is planning to cut down on CAPEX to invest more Rs 1250 crores.

 

Note:  * - As per CRISIL Research

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